Graeme Hart got out of Goodman Fielder nicely.
New Zealand's richest man sold his remaining 20% stake last month at $2.12 a share.
Yesterday Goodman Fielder's share price had its largest ever one day fall after confirming that soaring commodity prices, especially wheat, would make a mess of this year's earnings.
A combination of the drought and record high prices around the world for food continues to have an impact on a growing number of Australian companies.
Goodman Fielder is the latest example.
It's Australasia's biggest food group and yesterday its shares were sold off by more than 6% at one stage after revealing that the drought and soaring world commodity prices would cut earnings to a flat result for the year to next June.
The shares closed 12.5c down at $1.9750, after hitting a low of $1.9450 after directors informed the market that: "Present indications are that commodity costs for this financial year will be up by around $180 million, an increase of just under 40 per cent on last financial year".
This compared to the earlier forecast of a rise in profit for the full year, although the company had cautioned that there could be an impact from rising commodity prices.
The baking, spreads and food ingredients company told the ASX that net profit before significant items is likely to be around the same level as 2006/07, plus or minus 5% depending on commodity price volatility.
"It needs to be stressed, however, that the high commodity costs are primarily a result of adverse climatic conditions which of course may ease, providing future relief from these cost increases," it said.
"It should be noted that, despite the uncertainty around commodity costs, the Board is encouraged by the company's ongoing strong cash flow which is a function of robust management disciplines, solid market positions and outstanding brands."
Goodman Fielder made a net profit, including significant items, of $243.2 million in the 2007 financial year. Analysts had already factored in some impact with a consensus figure of around $223 million penciled into most forecasts
Goodman Fielder returned to the share lists in a float in December 2005 after Mr Hart sold shares in an initial public offering. Burns Philp bought the Goodman Fielder assets in 2003.
Goodman Fielder last month announced a $10 million charge against earnings to close a bakery, relocate the Mascot oil processing and packaging facilities in Sydney and sack 90 workers.
In a second announcement yesterday the company confirmed that the Mascot oils manufacturing plant would close and a new packaged food manufacturing plant would be constructed in western Sydney.
"The Mascot plant, which produces bulk oils and retail products including dressings, mayonnaise, condiments and sauces, is an old facility and not up to modern efficiency standards," Goodman Fielder Managing Director Peter Margin said in the statement.
Construction of the new plant is expected to commence early in 2008, with completion and the closure of Mascot expected to be around June 2009.
"Total Mascot site closure costs will be approx. $13.0 million, including $5.0 million which has been previously announced. These costs will be included as significant items in the accounts for the half year to 31 December 2007."
"When this new low-cost, flexible manufacturing facility is completed, the bulk oil production that is currently undertaken at the Mascot plant will be transferred to existing plants in Brisbane and Melbourne. Retail grocery product production will be transferred from Mascot to the new western Sydney plant," Mr Margin said.
Goodman said the new site, which will be located close to distribution centres operated by Goodman Fielder's major customers, will be developed and owned by a third party and operated by Goodman Fielder under a lease arrangement.
"We plan to invest around $30 million in new plant and equipment and the site will also include a modern fully equipped research and development facility to ensure that we stay at the forefront of new product innovation," Mr Margin said.
The Mascot plant employs around 120 people and the company will endeavour to place employees in other parts of the business. Where this cannot be achieved, full redundancy entitlements will be paid and outplacement services made available.
The company joins the likes of Ridley, Timbercorp, Futuris, McGuigan Simeon Wines, Fosters (more currency than drought, but there's still been an impact on beer and wine businesses), Grain Corp, ABB, Australian Agricultural Company (in which Futuris is selling its 43% stake because people think Aust Ag is drought affected.
It's not, with most of its properties enjoying very good growing seasons this year, but Futuris believes owning a slab of AAC is hurting its market recognition.
Meat prices have been hit by drought-induced sales of stock by farmers cutting herd sizes and flock numbers because of the drought.
Major retailer, Woolworths referred to the rising cost of food on Friday at the AGM when CEO Michael Luscombe said "It is important to point out that Australia, just like most other countries around the world, is in the grip of extreme upward pressure on food prices.
"The increasing price of transport and commodities such as grain is compounding the effects of our own drought and causing widespread price rises by manufacturers.
"We have been warning of this for over a year now and working hard behind the scenes to mitigate and absorb cost increases to us so that they don't flow through to the customer.
"Again, there is some political pressure for a regulatory body to monitor the reasons for these rising prices and we would welcome this wholeheartedly.
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